Investors’ Conference, 14-16 February 2012 – Mumbai Draft Speech for Dr C P Joshi, Hon’ble Minister of Road Transport and Highways

Distinguished Guests, Ladies and Gentlemen

It’s indeed a pleasure to be here today among all the investors; investors in the future of prosperous India, if I may call you so.

If you look at a country as large as India, roads and highways are the primary lifelines of economic growth. Roadways, as primary channel of the transport have a natural advantage over other modes such as Railways and Shipping, for its reach is beyond them. Our objective at the ministry of Road Transportation and Highways is to expand the road system and facilitate road transport ensuring that each citizen is connected to the larger economic growth process of the country.

You will be glad to know that India has second largest road system in the world; a network spanning 3.34 million kms. About 60 per cent of freight and 87 per cent of passenger traffic uses this network. Although National Highways constitute only about 1.7 per cent of the entire road network, they carry 40 per cent of the total road traffic.

These numbers are an indicator of where we stand and what lies ahead for us.

As you are aware, the Government of India has embarked on a massive National Highways Development Programme (NHDP). In the initial phase, NHDP targeted development of Golden Quadrilateral and North South & East West corridors that would provide connectivity to all four metros and cardinal points in the country.

Taking it ahead the next stage under NHDP Phase III, which is now under execution, envisages connectivity to Golden Quadrilateral — North-South & East west Corridors for state capitals, important tourist and industrial destinations:  high density traffic corridors etc. Our emphasis is on developing a grid of high class road network across India.

The next Phase will target the interior and backward regions, turning the grid into a well woven mesh of inter connected roadways.

Keeping in view the importance of road development, the Honorable Prime Minister had fixed a target of constructing 20 km of roads per day.  This by no means is an easy task. It translates in to constructing 7300 km roads every year.  However, under the NHDP, we were constrained to target only 2500 km during the current year as well as last year. The reason was we did not have enough projects in hand to achieve greater completion targets.

To correct this situation, the Govt. took various steps revamping the NHDP. Public Private Partnership (PPP), particularly, Build, Operate and Transfer [BOT] (Toll) was recognized as the preferred mode for award of projects.  Extensive consultation with all stake holders resulted in removal of procedural and structural bottlenecks in the award process.

 Consequently, the last two years saw acceleration in the award of projects. 3360 (three thousand sixty) km were awarded in 2009-10 and 5059(five thousand fifty nine) km awarded in 2010-11.

A number of steps have been initiated to enable faster and more inclusive growth of the transportation sector.  This time around we have fixed our targets at achieving 7,300 (seven thousand three hundred) kms for award of projects. Of this so far, 31 projects covering a length of about 4382 (four thousand eight hundred thirty two)kms with a total project cost of about Rs.39,152 crores have been awarded till 31st January 2012.

To sustain the acceleration in award process, annual pre-qualification of bidders has been introduced along with e-tendering and e-procurement of projects.  NHAI is poised to achieve the target it has set for award of projects this year.  We are actively considering development of an acceptable EPC document which will promote cost effective and timely execution of projects.

The response has been overwhelming. Each project has bid out both in terms of number of bidders as well as the competitiveness of bids. As a matter of fact NHAI has received record premiums this year. Let me share that 21 of the 31 projects awarded till January 2012 in the current fiscal have fetched premium of about Rs.2174.89 crores.

Not just that the NHAI has come up with the Public Issue of Tax Free Bonds for the 1st time, the issue has been very well received. The mobilization against NHAI Tax Free Bonds was made to the tune of Rs.25220 crore through Public Issue of Bonds against base issue size of Rs 5,000 crore with permission to retain amount upto Rs.10,000 crore. This success is due to the huge interest shown by Qualified Institutional Buyers (QIBs) and High Net worth Investors (HNI) in investing in NHAI.

Keeping in tune with the today’s time, we have brought road network on social network. Through Facebook, we are attempting to bridge the gap between road users and the service provider. Road users can now post their queries /complaints on the NHAI Facebook wall, which in turn is promptly acted upon.

As we talk of new developments like the social media, it would be right to share some more learning’s and improvements at our end. We observed that often gains of development were frittered away through inadequate or poor follow up measures.

Highway sector until recently, suffered from this inadequacy as maintenance of highways left much to be desired. NHDP I am glad to say has changed this scenario. I’ll be candid to say more requires to be done in this regard, but we have taken the first few steps towards a paradigm shift in the approach towards maintenance.

We have decided to adopt a pro-active approach rather than a reactive approach to maintenance. A form of PPP in maintenance through OMT based concessions is set to revolutionize maintenance of highways. We hope to award about 3,000 kms for maintenance through OMT concessions, very soon.  Special emphasis is also now given on activities like Corporate Social Responsibilities (CSR) etc. including development of Green Highways. NHAI is undertaking AIDS awareness programmes amongst high risk segments in the transportation sector. NHAI is adopting good practices in re-habilitation and re-settlement customized to Indian conditions.

Portraying the scenario and developments we have made in the field, its right to discuss investment opportunities. There are number of new projects on offer under PPP model in the road sector, they exhibit several investment opportunities for investors and companies with diverse business lines such as engineering companies, civil work contractors, O&M contractors, toll operators, construction equipment manufacturers etc. and other stakeholders such as advisors, financiers and sector professionals.

Close to just a quarter, say about 23 per cent of the total highways in India are either four or six lanes. There is a huge potential for investment in this sector likely to create opportunities in the core construction industry which may also be attractive even for foreign players. Various investment assessments estimate that Investment of around USD 120 billion to come in the next five years.

To all the Investors here and elsewhere, my message is simple – there are plenty of opportunities that the highway sector offers.  With a huge array of projects up for award, developers require finance to take up these projects. Here the medium of PPP is an ideal mode to channel investment into this sector.  The Government is also promoting a favorable environment to facilitate such investment in the road sector.  100 % FDI is now permitted in road sector.  We have comprehensive agreements to avoid double taxation with a large number of countries.

Modern financial systems, sound banking network and a robust economy are compelling reasons to invest in India.  As I mentioned, we have introduced transparent systems and simple and flexible structures for promoting Public Private Partnership in road sector.

At the moment we have more than 100 consortiums engaged in execution of PPP projects.  I believe this is the right opportunity for all the Investors to contribute in our effort to promote growth of Highways.  I invite you to be partners in this process.